November 28, 2008
To:
Academic Money Purchase Pension Plan Members
From:
Academic Money Purchase Pension Plan Committee (AMPPC)
Canadian Equity Fund – New Investment Manager
At the 9th of October meeting of the Board of Governors, the Board accepted the
recommendation of the AMPPC that Scheer Rowlett Associates replace McLean Budden as the
second active investment manager of the Canadian Equity Fund, effective November 3, 2008.
This newsletter provides Plan participants with background information to this recommendation
In March of 2007 the AMPPC placed McLean Budden on a quarter-to-quarter watch list as a
result of the firm’s failure to meet its benchmark performance standards over the previous four
years. In February of 2008 the Committee authorized Hewitt Associates to prepare a report of
Canadian equity managers that were open to new business. This report was considered by the
AMPPC in June and, on the basis of this report, the AMPPC decided to conduct a manager
search and created a short list of three candidates.
On September 5, 2008, the AMPPC conducted interviews with principals from the three firms.
On the basis of the interviews and another report prepared by Hewitt and Associates the
Committee concluded that, although all three firms are strong candidates, the preferred choice
is Scheer Rowlatt and Associates. The basis for this recommendation is threefold. First, SRA
has demonstrated consistently superior returns over at least two market cycles. For example on
the basis of rolling four-year averages since 2002, SRA’s performance has been in the first
quartile of all Canadian equity investment managers in all seven years measured on a June-toJune basis. This is a remarkable record of consistency. In addition, over the past ten years
SRA has outperformed the benchmark by an average of 4.9 percent each year, the best
absolute performance of the three managers interviewed.
Second, the style of SRA (relative value) complements that of JF (GARP), the other Canadian
equity manager, as it’s portfolio captures more of the gains in advancing markets than does the
portfolio of JF. This means that a blended portfolio of SRA and JF will generate more stability of
return on an annual basis than either of the two individual portfolios without sacrificing the
average level of return.
Third, on the basis of the interview the AMPPC has confidence that SRA could replicate its
historical performance into the future, as the methods it uses to pick stocks is quite transparent.
Other criteria the AMPPC used to rank the candidate firms, such as the level of fees and overall
organizational strength and stability simply reinforced its view that SRA is the best choice for
replacing McLean Budden.
If you have any questions about the replacement of managers, please contact the Director of
Pension, Garry Schlichemeyer at 966-6633 or contact any of the AMPPC members. The
AMPPC members are:
•
B. Lucas (Economics)
L. Kennedy (Financial Services)
•
D. Gilchrist (Economics)
M. Sander (Financial Services)
•
G. Tannous (Commerce)
H. Wall (Facilities Management)